Expensive lessons: Courts tell buyers to pay up after backing out of real estate deals because of easements


thestar.com
Bob Aaron
Bob Aaron bob@aaron.ca

Posted On: Saturday, July 25, 2020
Fighting failed real estate deals in court can be futile — and expensive — as shown by the verdicts in two recent Ontario cases.

In February, 2020, Mohammad Jafar Haghollahi and Parvaneh Yaghoubi signed an agreement to buy a property on Lockwood Circle, in Newmarket, from Gregory and Tara Butt. The contract price was $1,755,000 with a $75,000 deposit.

The property, a two-storey home with five bedrooms and five bathrooms, a pool, cabana and above-ground hot tub, has a title subject to two usage rights, or easements, sanitary and storm sewer access by the town of Newmarket.

A standard title clause in the agreement said title had to be clear except for easements that included drainage, storm and sanitary sewers.

A building location survey of the property, clearly showing the easements, was attached to the agreement as a schedule. It also contained references to the registered easements.

Prior to closing, the lawyer for the buyers submitted a formal demand that the easements be removed from title. The sellers’ lawyer responded that the title objections were not valid.

The buyers then refused to close the deal and the sellers sued the buyers.

Ruling in favour of the sellers, Justice Jill Cameron concluded on June 28 there was “an inference that the existence of the easements is not the real motive behind seeking rescission of the agreement.”

Cameron noted that the sellers had good title to the property and could convey substantially what the purchasers contracted to get. The sellers were awarded the $75,000 deposit that the buyers had paid.

A similar case was heard in Newmarket court this past February. In 2017, buyers Hong Phat Tran and Thu Thuy Thi Dinh agreed to purchase a house on St. John’s Sideroad W., in Aurora, for $2,130,000 from Il-Jung Joo and Hae-Sun Joo. They paid a $100,000 deposit.

The title search of the property revealed two registered sewer easements to the town of Newmarket, an easement to Bell Canada for maintenance to telecommunications facilities, and easements to Aurora Hydro and Aurora Cable TV.

A survey of the property attached to the offer depicted the easements and their locations.

The lawyer for the buyers demanded the easements be removed from the property’s title. The sellers refused and the deal did not close.

The sellers resold the property for $1,700,000 — a loss of $430,000.

In awarding the sellers $430,000 plus $18,000 in costs without the need for a trial, Justice Gregory Mulligan found that the buyers had breached the contract and noted “there is no indication as to how the property would be serviced by the utilities, including hydro, telephone or cable TV, if the easements were removed.”

As I see it, three important takeaways from these cases are:

1. There is little point in litigating a failed real estate transaction on the basis of standard easements on title.

2. Always attach a land survey to a purchase agreement.

3. Courts do not like technical excuses for getting out of a purchase contract.
 

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Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.

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